Life Cycle Planning

Financial planning means something different to everyone. For some, it's about
getting by on their paycheck, for others it's about watching the stock market
each day.

Unfortunately, very few of us feel prepared to meet our ongoing financial obligations
and objectives. Worries about money have become one of the greatest anxieties
of our day.

Because our lives and goals are so different, there is no turn-key solution
for managing ones finances and meeting financial goals. We can, however, identify
several steps successful people take in planning for and meeting their financial
goals.

We call these steps "Life Cycle Planning" because each step can be
tied to the attainment of certain life defining events that almost everyone
goes through.

Development of Human Capital

Human Capital is a person's ability to turn their skills and abilities into
a livelihood. The development of these skills and abilities helps us maximize
our income potential in a competitive marketplace.

In our early years, usually between age 19 and 25, we set ourselves on a course
that largely defines our Human Capital potential. Each of us makes an investment
in Human Capital, whether we realize it or not. For some this is an investment
of time, gaining experience and skills on the job. For others it is an investment
in trade school or college.

It should also be noted that although our greatest focus on Human Capital development
is in our early years, this is an investment we should continue to make and
assess throughout our working careers.

Management of Expenses, Budgeting

Once our "Human Capital" investment begins to pay dividends in the
way of earnings, we must begin to develop and apply management skills to our
newfound earnings.

Without managing our expenses, our wants and needs will invariably outpace
our ability to earn. By implementing some form of budgeting we can begin to
set our sights on saving and meeting our longer term financial objectives.

A beginning budget can be as simple as setting aside a predetermined percentage
of our earnings each month for saving, spending what is left until it is gone,
then spending nothing more until next month.

Adequate Liquidity

As our budget begins to pay off in a healthy savings account, we begin to wonder
how best to apply our limited savings to our unlimited needs and wants.

Without exception, the first financial need we should meet is to have an emergency
fund. An emergency fund allows us to cover unexpected short term needs using
cash instead of leveraging our future earnings through costly loans.

As a general rule of thumb, your emergency fund should be adequate to maintain
your standard of living for six months.

Adequate Insurance Protection

A major disability, the loss of a family breadwinner, a fire in your home, a
major medical problem for a family member... the most dramatic emergencies can
seldom be planned for through personal saving.

Although such tragedies can create devastating individual financial hardship,
the financial risk of such events can be shared by very large groups of families
and individuals through insurance.

Life insurance, disability insurance, property and casualty insurance and major
medical insurance all have a place in our Life Cycle planning.

Long-Term Funding Objectives

Once we have accumulated sufficient funds to cover our emergency needs and purchased
protection against financial risks, we can begin saving for our long-term goals
in earnest.

Material discussed is meant for general illustration and/or informational purposes
only and it is not to be construed as tax, legal, or investment advice. Although
the information has been gathered from sources believed to be reliable, please
note that individual situations can vary therefore, the information should be
relied upon when coordinated with individual professional advice.

This web site may contain concepts that have legal, accounting and tax implications. It is not intended to provide legal, accounting or tax advice. You may wish to consult a competent attorney, tax advisor, or accountant.